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ICICI Securities

Published on 20/09/2021 10:32:19 AM

Bank Nifty: Outperformance in banking stocks should take index towards 39000…

* The Bank Nifty managed to outperform last week as it closed at new lifetime highs. Private banks along with the PSU pack did well where Kotak Mahindra Bank and IndusInd Bank outperformed. Axis Bank managed to close near its highest Call base indicating more upsides in coming days

* Last Friday we saw sharp reversal happening from higher levels due to which the volatility index moved to three months high and closed above 15%. We feel volatility would continue to rise in coming days due to which the trading range would increase in indices and sharp moves being expected on both sides

* Due to high volatility, the option OI is placed from 36500 to 38500 strikes. However, major Put OI writing observed in 37000 strike followed by 37500. On upsides, we feel the Bank Nifty is likely to head towards 39000 as money flow is likely to seen from IT and metals to banking

* The current price ratio of Bank Nifty/Nifty has reverted from its yearly low. We feel the outperformance in banking stocks should continue for a couple more days

 

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ICICI Securities

Published on 20/09/2021 10:32:04 AM

Nifty: Positive bias remains with support near 17400...

* Indian markets continued to outperform the rest of the world and made fresh lifetime highs near 17800 during the week before closing near 17585 as some profit booking was observed from highs on Friday with gains over 1%. After a range bound last month, banking index showed outperformance and led the market momentum. Along with it, underperforming stocks also exhibited a fresh up move

* On the data front, the current up move has put Call writers on the block and positions were moved to deep OTM strikes towards 18000. Despite significant writing at ATM and OTM Call strikes on Friday, we believe till major Put bases are not breached, one should remain positive. During the last couple of weeks, Put writers continued to strengthen the base. For the coming weekly settlement, 17400 holds noteworthy open interest

* On the volatility front, India VIX has moved to its highest levels in more than three months and closed above 15 levels. While the market remains in an uptrend, such a sharp rise in volatility ahead of FOMC meet next week may induce some profit booking in the coming sessions. Hence, we advise to hold long positions above 17400 levels

* Sectorally, we believe banking would remained the major leader in the coming sessions while technology stocks may see further consolidation after significant outperformance of the last couple of months. At the same time, metals may come under pressure due to liquidation of positions

 

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ICICI Securities

Published on 20/09/2021 10:30:35 AM

Nifty Bank: 37668

Technical Outlook

• The weekly price action formed a small bear candle which remained contained inside previous week price range highlighting consolidation afterrecentup move

• Going ahead, we expect the index to undergo a healthy consolidation in coming week, thus forming a higher base above the upper band of the recent range breakout area (36200 ) . Our broader positive stance is intact with bank Nifty gradually heading towards 37700 levels in September 2021 as it is the confluence of the measuring implication of the recent range breakout (36300 -34800 ) and the previous all -time high of February 2021

• The index has recently witnessed a faster retracement of its preceding decline as 10 sessions decline (36317 -34817 ) was completely retraced in just five sessions . A faster retracement in less than half the time interval highlightspositive structure

• Buying on declines strategy has worked well over past 15 months . Hence, any breather in the coming week would offer incremental buying opportunity inquality banking stocks

• The index is seen forming higher high -low in the larger degree chart, which gives up confident to revise the support base higher towards | 35300 -35500 levels as it is the confluence of the following technical observations :

• 80 % retracement of the current up move (34817 -37140 ) placed around 35300 levels

• the value of the rising trend line joining the previous lows is also placed around 35480 levels

• The weekly stochastic is seen rebounding from the neutral reading of 50 , thus supports the overall positive bias in the index .

• In the coming session, index is likely to open on a flat note amid weak Asian cues . We expect the index to trade in a range with positive bias while holding above Wednesday’s low (36502 ) . Hence, use intraday dips towards 36550 -36610 for creating long positionfortargetof 36840 , maintain a stoploss of 36430

 

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ICICI Securities

Published on 20/09/2021 10:30:08 AM

Nifty: 17629

Technical Outlook

* The Nifty hit a new high of 17436 and then traded in a tight 200- point range (17250-17436) for the rest of the week. The weekly price action formed a small Doji indicating pause in upward momentum after a sharp 12% rally in just five weeks, that led daily and weekly stochastics in overbought trajectory (readings beyond 90). Meanwhile Nifty small cap index formed sizeable bull candle to record fresh life high indicating continuation of uptrend

* We expect markets to turn stock specific, while Nifty to undergo a healthy consolidation in coming week. Hence, it would be prudent to stick to buy on decline strategy to accumulate quality stocks as over past 15 months such strategy has worked well for investors. As we do not expect Nifty to breach 16900 in consolidation phase, dips towards psychological level of 17000 would offer incremental buying opportunity in coming week

* Structurally, our broader positive stance is intact with Nifty gradually heading to 17600 in September 2021 as it is the price parity of July-August rally (15515-16700), projected from midAugust low of 16376. Sectoral churn amid consolidation would make overall strength healthy going ahead

* On sectoral front, consumption, capital goods, realty and telecom to outperform while BFSI,metal offerfavourable risk-reward setup

* In large caps, we like HDFC, Bharti Airtel, Kotak Mahindra Bank, Titan, Tata Steel while in Midcaps we prefer Godrej Properties, SBI Cards, Zensar Technology, Gokaldas Exports, Trent, Safari Industries, TCIExpress,MCX, Vardhaman Speciality steel

* On expected lines, broader market indices have regained upward momentum and hit new lifetime high confirming broader structural uptrend. We expect stock specific action to continue and broader indices to relatively outperform Nifty in coming week. Structurally, the formation of higher high and low, signifies continuance of positive bias which makes us confident to revise support base upward at 16900, as it is 50% retracement of current up move (16376 -17436)

* In the coming session, index is likely to open on a flat note amid weak Asian cues. We expect the index to consolidate amid stock specific action, while sustaining above 17300 levels. Hence use intraday dips towards 17290-17315 to create long for target of

 

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ICICI Securities

Published on 17/09/2021 11:03:46 AM

 

Technical Outlook

Indian equities continued their record setting spree outpacing global peers, post the second Covid-19 wave. We reassess the broader technical setup to ascertain further direction for the rest of CY21.

What we expect

Indian equities are in the middle of a multi year secular bull cycle. We expect the Nifty to head towards 18600 by end of CY21 led by BFSI, IT & telecom, auto, capital goods, realty & infra. In the process, bouts of volatility should be used as incremental buying opportunity as we do not expect the Nifty to breach 16300. Our prognosis is backed by following technical parameters:

* The index followed a specific rhythm since April 2020 wherein the magnitude of each major rally has been around 33%, containing inbetween corrective phases of 5-6%. The current rally since April 2021 lows of 14151, so far has gained 23%. We expect the market to maintain its rhythm of the past 15 months with the current up leg expected to mature around 18600 levels. Therefore, temporary spells of volatility of around 5% from here on would offer incremental buying opportunity

* Our bottom up statistical model based on relative strength rankings of the Nifty constituents, supports the target of 18600, thus coinciding with conventional chart work

* Relative performance ratio of Indian equities against S&P500 is on the cusp of breakout from 12-year long falling channel indicating multi year phase of relative outperformance ahead. Comparable breakout in CY04 led to relative outperformance during CY05-09

* Midcap and small cap indices are in the early stage of multi year bull market after reversing 2018-20 down cycle. Each of the major bull markets over two decades have generated average returns of 130% from breakout level. From 2020 breakout point, midcap and small cap indices have gained around 70%. Going by history, both indices are expected to gain another 30% from the current juncture over the next one year with intermediate corrective phases of 8- 10%, which will offer incremental buying opportunity

 

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